Singaporean-based exchange Crypto.com has denied allegations of engaging in proprietary trading and other illicit activities. The company asserted its commitment to adhering to industry best practices and maintaining transparency.
Recently, reports emerged suggesting that Crypto.com had deployed internal teams to conduct proprietary trading, causing concern within the crypto community. According to information provided to Financial Times, the platform’s executives allegedly required employees to sign “sworn statements” denying any involvement in such practices.
Crypto.com maintained that it had never instructed its staff to provide false information to other market participants. The company emphasized that the majority of its revenue is generated through its application for retail traders.
To address concerns about potential conflicts of interest, Crypto.com explained that its trading team ensures risk neutrality by hedging positions across multiple venues, including the Crypto.com exchange.
The platform dismissed accusations that its market-making unit seeks to manipulate liquidity, emphasizing its commitment to continuously improving order book liquidity and lowering spreads for the benefit of all participants.
“As such, the Crypto.com trading team ensures that Crypto.com is risk neutral by hedging these positions on a number of venues, including the Crypto.com exchange,” the company said.
The recent allegations add to the challenges faced by Crypto.com, which has also been impacted by the regulatory crackdown on the cryptocurrency sector by the United States Securities and Exchange Commission (SEC). As a result, the platform announced its decision to halt its services for institutional clients in the U.S., effective from June 21.
This incident echoes a similar situation involving Coinbase. In September of last year, rumors circulated suggesting that Coinbase had engaged in proprietary trading activities.
The exchange denied the allegations, asserting that it operates as an agency-only platform, facilitating client-driven cryptocurrency transactions rather than conducting proprietary trading.
In a similar vein, leading crypto exchange platform Binance also faced allegations of engaging in undisclosed proprietary trading on its own platform by the Commodity Futures Trading Commission (CFTC)
Binance had allegedly conducted trades through approximately 300 undisclosed “house accounts.” These accounts, directly or indirectly owned by Binance’s founder and CEO, Changpeng “CZ” Zhao, as well as affiliated entities, were reportedly utilized for proprietary trading without customer knowledge or disclosure.
The CFTC’s official press release also accused Binance of offering and executing commodity derivatives transactions for U.S. customers without proper compliance controls. It also claimed that Binance had failed to implement measures to prevent terrorist financing and money laundering and provided instructions to customers, including VIP clients, on evading its compliance controls after placing the said controls.
The complaint additionally charges Binance with acting as a designated contract market or swap execution facility without proper registration. It highlighted supervisory failures and communication methods used by Binance to avoid leaving evidence of efforts to retain U.S.-based customers.
The complaint held Zhao liable for Binance’s violations due to his control and decision-making authority over the platform. Samuel Lim, Binance’s former chief compliance officer, is accused of intentionally undermining the company’s compliance program and aiding in the violations.
According to the CFTC, The alleged lack of transparency surrounding Binance’s proprietary trading activities is a significant ethical and legal concern. The company failed to disclose these activities in its Terms of Use or any publicly available documents, potentially compromising the fairness and integrity of its platform.
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